Correlation Between General Insurance and Nazara Technologies

Can any of the company-specific risk be diversified away by investing in both General Insurance and Nazara Technologies at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining General Insurance and Nazara Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between General Insurance and Nazara Technologies Limited, you can compare the effects of market volatilities on General Insurance and Nazara Technologies and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in General Insurance with a short position of Nazara Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of General Insurance and Nazara Technologies.

Diversification Opportunities for General Insurance and Nazara Technologies

0.77

Correlation Coefficient

General Insurance  Nazara Technologies

Poor diversification

The 3 months correlation between General and Nazara is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding General Insurance and Nazara Technologies Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nazara Technologies and General Insurance is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on General Insurance are associated (or correlated) with Nazara Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nazara Technologies has no effect on the direction of General Insurance i.e., General Insurance and Nazara Technologies go up and down completely randomly.

Pair Corralation between General Insurance and Nazara Technologies

Assuming the 90 days trading horizon General Insurance is expected to generate 1.28 times more return on investment than Nazara Technologies. However, General Insurance is 1.28 times more volatile than Nazara Technologies Limited. It trades about 0.15 of its potential returns per unit of risk. Nazara Technologies Limited is currently generating about 0.1 per unit of risk. If you would invest  36,315  in General Insurance on October 6, 2024 and sell it today you would earn a total of  9,455  from holding General Insurance or generate 26.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

General Insurance  vs.  Nazara Technologies Limited

General Insurance

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in General Insurance are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, General Insurance displayed solid returns over the last few months and may actually be approaching a breakup point.

Nazara Technologies

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nazara Technologies Limited are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent basic indicators, Nazara Technologies sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with General Insurance and Nazara Technologies

The main advantage of trading using opposite General Insurance and Nazara Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if General Insurance position performs unexpectedly, Nazara Technologies can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Nazara Technologies will offset losses from the drop in Nazara Technologies' long position.

The idea behind General Insurance and Nazara Technologies Limited pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Fundamental Analysis module to view fundamental data based on most recent published financial statements.